Technical Assistance Consultant’s Report
Project Number: 52232-001 April 2020
Islamic Republic of Pakistan: Enhancing Technology-Based Agriculture and Marketing in Rural Punjab
Prepared Dr. Shahid Ahmad, Mr. Sahibzada Mansoor Ali, and Dr. Babur Wasim Arif Islamabad, Pakistan
For Asian Development Bank and the Punjab Agriculture Department
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.
ADB TA 9838-PAK: Enhancing Technology-Based Agriculture and Marketing in Rural Punjab
COVID-19 Impact Update on Agriculture and Food Security in Pakistan
Bulletin Issue No. 1 as of 30 April 2020
Highlights: Development partners including the Asian Development Bank, International Fund for Agricultural Development, the World Bank, United States Agency for International Development , United Nation agencies (Food and Agriculture Organization, United Nations Children's Fund, World Food Programme, etc.), and other international institutions have taken serious note of impact of COVID-19 on health; food security; agriculture; water, sanitation and hygiene (WASH); and water availability for agriculture in Pakistan. The federal government and institutions of Pakistan are also responding to the call of the Prime Minister of Pakistan to look into ways to minimize COVID-related impact and losses in the country’s economy. The Pakistan Institute of Development Economics has initiated substantial work on impacts of COVID-19 on various sectors of the economy. The State Bank Pakistan undertook number of actions to revise the monitory policy in terms of interest rate and supporting financial institutions for improving their performance including the online banking. They are providing economic data on daily, weekly and monthly basis. The Institute of Policy Studies of Islamabad has also initiated a series of webinars involving policy options for the development sectors and has published its first report. The private sector industrial and business group Engro Pakistan completed an impressive study and described COVID-19 scenarios and implications for Pakistan for the major development sectors.
➢ Key Data
National sources
1. Government of Pakistan. Coronavirus in Pakistan. Islamabad.
The Government of Pakistan update on the COVID-19 situation in Pakistan as of 24 April 2020 highlighted the 11,155 confirmed cases. The active cases are 8,391, 237 deaths, and 2,527 recovered patients. The daily trend of new cases in 24 hours showed a higher rate of increase in last week, and is a clear indication that the next 2 weeks will be serious in Pakistan. The highest number of cases are in Punjab (4,767), followed by Sindh (3,671), Khyber Pakhtunkhwa (1,541), Balochistan (607), Gilgit-Baltistan [300], Islamabad (214), and Azad Jammu and Kashmir (55).
2. State Bank of Pakistan (SBP). Pakistan Economic Data. Karachi.
United States (US) dollar-Pakistan rupees (PKR) exchange rate has fluctuated considerably since March 2020. At the start of the crisis, it reached to PKR169 due to impacts on reduction in exports and upcoming loan payments. Once the International Monetary Fund provided refinancing facility along with other donors, Pakistan rupees has strengthened (below PKR160 rupees) due to easing of pressure on external payments and impact of reduced imports. One of the immediate decisions by central bank at the start of the crisis was lowering of interest rates. Overall, the central bank base rate (policy rate) has been lowered by 425 basis points
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to 9% over the past month. Consumer price index has been showing a downward trend over the past month. However, demand and supply disruptions may impact in multiple ways and oncoming data will be looked at closely to provide signs of changing trends.
3. Pakistan Bureau of Statistics. Weekly Sensitive Price Indicator (SPI) with base 2015-16. Islamabad.
The sensitive price indicator (SPI) for the current week ended on 23 April 2020 recorded an increase of 0.62% over the last week. The increase in SPI is highest for lowest consumption quintile (i.e., 0.91%) and lowest for the upper consumption quintile (i.e., 0.52%). The increase in SPI is mainly due to a rise in prices of food items, i.e. Potatoes (24.75%), Onions (9.39%), Bananas (4.72%), Chicken (4.68%), Garlic (2.65%), Milk Fresh (1.33%), Rice IRRI (1.15%) and Curd (1.12%).
4. Punjab Agriculture Department. Agriculture Market Information System (AMIS)–Daily Price Trend of Major Agriculture Commodities n the Punjab. Lahore. April 2020.
AMIS provides daily, monthly and annual data of agricultural markets comprising wholesale prices, arrival quantity in markets, support prices, cost of production, world crop data, international commodity prices, imports and exports, food processing, post-harvest practices, quality standards, and other related parameters. Average wholesale prices of most commodities in Punjab are significantly higher in 2020 compared to same period in the previous year (17 March–17 April 2019). However, this increase was established before the disruptions relating to COVID-19. No immediate impact on domestic prices is evident yet. While there were some disruptions at the start of the lockdown period, by and large wholesale agriculture markets have been functioning as normal. Individual market participants may still face transport and logistical issues that have an impact on price, quality, and quantity of produce reaching markets and consumers.
5. Pakistan Institute of Development Economics (PIDE). Pakistan COVID-19 Dashboard (Current State & Projection V6.0). Islamabad. April 2020.
Agriculture is flagged as the sector with the highest vulnerability to the COVID-19 impact in terms of food security across all provinces of Pakistan, and the only sector to be rated as 90% vulnerable. The provincial level vulnerability is estimated as 87.7%, 84.6%, 94.7%, and 90.5% for Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan, respectively. PIDE also projects that due to COVID-19, the poverty rate will increase from 24.3% (baseline poverty) to 33.7% (in case of low impact scenario) followed by 44.2% (in case of medium impact scenario) and 55.9% (in case of high impact scenario). Apart from the poor, a bulk of population share falls in the category of vulnerable groups, whose income falls just above the poverty line. Longer economic recession would push these people into poverty
International sources
6. Food and Agriculture Organization (FAO). Food Prices Monitoring and Analysis (FPMA) Bulletin # 3, 10 April 2020.
International wheat prices are showing downward trend due to large global stocks and good global 2020 supply outlook despite Covid-19. The same pattern has been observed for maize, but rice has seen an upward trend from the second half of March 2020 due to disruptions in ADB TA 9838-PAK: Enhancing Technology-Based Agriculture and Marketing in Rural Punjab 3
Vietnam and Thailand. Pakistan domestic wheat flour: Moderate Price Warning. Upsurge in demand and transport disruptions related to the COVID-19 led to an increase in prices in the second half of the month. Harvest delays due to above-average rains throughout March, which also caused localized crop damages, provided further upward pressure. Prices remained well above their year-earlier levels and at near-record highs in some markets after the steady increases late last year and in January 2020 due to tight supplies. The bulk of the 2020 harvest is expected to reach the markets towards the end of April and the output forecast is 25.2 million tons, close to the average of the past five years.
➢ Reports and Analysis
National sources
7. PIDE. COVID-19 E-Book. 15 April 2020.
The COVID-19 outbreak has not impacted food prices yet, except for some stress on the prices of pulses. It is, however, too early to make any conclusions. The possible spread of the coronavirus to the rural areas and widening lockdowns may disrupt distribution channels affecting food prices. Pakistan has good storage facilities of grains and the new wheat crop is about to be harvested. There is no need to panic for an imminent risk to food security, but there is also no reason to be complacent either. If the COVID-19 pandemic does not last for too long, it is believed that there will have no major shortage of staple foods. If, however, the situation prolongs, it will impact perishable food items first and then the staple foods. Perishable food items are plucked, packed and shipped on daily basis, which demands continuity of farm labor supply and human-to-human interaction.
8. Engro Corporation Limited. COVID-19: Scenarios & Implications for Pakistan. Karachi. 8 April 2020.
Agriculture gross domestic products can contract by 2%–7% with an impact of the losses of $1–4 billion based on compromised sowing in May 2020 and reduction in commodity prices. Agriculture is classified as the largest and most critical sector in terms of importance for daily functioning of society with medium potential of virus propagation. Agriculture imports will be down by 15%–20% with volume expected to go down by 5%–10% and price by 10%. With 24 million employed in agriculture, it is expected that 1 million will become unemployed during the suppression period (out of a total 15–20 million expected for the whole economy). In case of sustained disruption this could double for the sector.
9. Institute of Policy Studies. Tackling COVID-19: Policy Options for Pakistan, Pandemic Policy Monograph Series No. 1. Islamabad. 17 April 2020.
The major loss will come from exports with the country taking a hit of $1.0–1.5 billion. Pakistan’s top export partners the US, United Kingdom, People’s Republic of China, and United Arab Emirates are facing problems, and even after the crisis blows over, export demand will continue to face compression. The sustainable development goals (SDGs) have to be seen in the context of before and after COVID-19. Its impacts would affect SDGs as many people would fall below the poverty line, become unemployed, potentially affecting mental health and productivity; hence, new standards would have to be defined.
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10. Planning and Development Board, Government of the Punjab. RISE Punjab: Responsive Investment for Social Protection and Economic Stimulus - Punjab’s Post COVID-19 Public Investment Strategy. Lahore. 27 April 2020.
The agriculture sector, compared to manufacturing and services sectors, has not suffered a big loss. However, the disruptions in the supply chain may impact the availability of quality seeds, fertilizers, and other inputs. Additionally, the anticipated locust attack is still looming and can affect the yield of crops along with rains during harvest time. The services sector has been hit hardest with more than 70% of the enterprises being impacted and expected to face longest lockdowns due to their nature of human contact. The scope of digital marketplace has suddenly surged, however, the mushrooming has to be managed in a way that it offers an opportunity for all. Job loss among low wage workers of informal sector is increasing and it demands a robust and inclusive social protection intervention. The RISE Punjab program launched by the provincial government is aimed to minimize the impacts of COVID-19 on livelihood and businesses through provision of economic framework and strategic direction for the public investments and by aligning policies for the next year’s development plans as well as realigning ongoing projects. The framework provides recommendations on health emergency, social protection, and economic sustainability and stimulus. The effective risk communication is kept at the heart of all proposed interventions, which calls for a responsive financial management system with clear processes for disaster risk financing highlighted.
International sources
11. FAO. COVID-19 Emergency in Pakistan: Immediate and Expected Impacts on Food Security, Livelihoods & Agriculture Markets, and Options for Action. 6 April 2020 (click on the image for details)
Less than 18 days of wheat stocks are left in the country before the new harvest. There are ample rice stocks, and prices are stable domestically. Stocks of pulses are only for 1–3 months, and as these are partly imported, there is a need to focus on import bottlenecks. No serious hoarding behavior has been observed compared to other countries. Balochistan, Khyber Pakhtunkhwa, Azad Jammu and Kashmir, and Gilgit-Baltistan are at risk of supply disruptions. Gilgit-Baltistan is the most deficient in food grains with limited road access for rural population. Food consumption and demand have taken, a hit but the upcoming month of Ramzan requires a close watch as normally expected changes in consumption patterns may get distorted at this time.
12. International Food Policy Research Institute (IFPRI). Global Food Policy Report 2020: Building Inclusive Food System. 7 April 2020.
Pakistan is the only country in South Asia where real wages for agricultural workers have not risen since 2000. Cereal consumption in Pakistan is 25%–28% for the poorest 20%, and 12%– 14% for the richest 20% population. This indicates that COVID-19 impacts the poorest 20% the most as they are vulnerable due to double consumption of cereals compared to the richest 20%.
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13. The World Bank. Open Knowledge Repository: Commodity Markets Outlook, April 2020. 23 April 2020.
Almost all commodity prices saw sharp declines during the past 3 months as the COVID-19 pandemic worsened. Mitigation measures have significantly reduced travel and transport, causing an unprecedented decline in demand for oil, while weaker economic growth will likely further reduce commodity demand, especially for energy and metals. Most agricultural commodity prices have been broadly stable. In some markets, however, numerous factors began exerting pressure toward the end of the first quarter of 2020, most importantly the widely adopted mitigation measures to contain the spread of COVID- 19. “Traditional” factors included multiyear high stocks levels (the third highest level in recent history) and record production for some grains due to favorable weather conditions in key producing regions. The COVID-19 pandemic, however, added an entirely different set of factors: weaker demand, a sharp reduction in input costs (energy and fertilizer), trade restrictions, disruption in supply chains (on both the input and output side), a much stronger U.S. dollar, and panic buying.
14. Asian Development Bank (ADB). Asian Development Outlook 2020: What Drives Innovations in Asia. 3 April 2020.
Pakistan’s economic growth rate will slow as agriculture stagnates, notably affecting cotton output, as well as economic stabilization efforts and the impact of the COVID-19 outbreak constrain domestic demand. Pakistan will struggle this year with double-digit inflation fueled by escalating food prices, scheduled hikes to utility rates, and domestic currency depreciation. The ongoing COVID-19 pandemic underscores the importance of strengthening social protection in Pakistan, especially as spending on social development has not kept up with the growing need.
➢ Related Links
National sources
15. SBP. Countering COVID-19 – Measures by State Bank of Pakistan. April 2020.
SBP is taking a range of measures to protect the safety of public and address the economic impact. In line with the mandate, SBP is focused in ensuring that inflation remains contained, reducing the impact of COVID-19 on economic growth and employment, and overseeing that the banking and payments system remains healthy. In this context, SBP has already taken a number of policy measures. SBP is working with stakeholders to continuously assess the situation and stand ready to take additional measures as the situation related to COVID-19 and its impact on the economy become clearer. The major actions taken by SBP are: (i) SBP reduces policy rate by a cumulative 425 basis points since 17 March 2020; (ii) SBP refinanced schemes to support employment and prevent layoff of workers; (iii) Prime Minister's COVID- 19 Pandemic Relief Fund-2020; (iv) relief package for households, businesses & refinance schemes; (v) ensuring the availability and continuity of financial services; (vi) promoting digital payments; (vii) relaxing credit requirements for exporters and importers; and (viii) facilitating new investments.
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16. PIDE. Pakistan and the COVID-19 Pandemic. April 2020.
PIDE has established the PIDE COVID-19 Dashboard providing largest source of data and information under five types of knowledge products comprising of: (i) 19 bulletins; (ii) 24 newsletters; (iii) 24 blogs; (iv) PIDE COVID-19 War 18 videos; and (v) 19 crowdsourcing COVID response. There are six bulletins which are relevant with food security and agriculture comprising of: (i) labour market and COVID-19; (ii) food prices post-COVID-19’s outbreak; (iii) economic impacts of COVID-19 through trade disruptions in Pakistan; (iv) template to monitor the impact of COVID-19 on Pakistan’s economy; (v) sectoral analysis of the vulnerably employed; and (vi) Caring for poor and vulnerable.
International sources
17. FAO. Global Information and Early Warning System (GIEWS). Country Brief: Pakistan. 17 April 2020
Harvesting of the 2020 irrigated wheat crop started in March 2020 in the southern province of Sindh, with the bulk to be gathered between April and mid-June. The 2020 wheat season started on time last October 2019 and progressed well until February 2020 due to favourable weather, ample irrigation water supplies and adequate availability of agricultural inputs, such as fertilizers, chemicals and labour, allowed farmers to plant an above-average cropped area and fostered expectations for bumper yields. In March/April, unseasonal heavy rains and localized hail over areas of the main wheat-producing province of Punjab, delayed harvesting operations and caused localized damage to standing crops. Overall, 2020 wheat production is expected to remain close to the last 5-year average, but below expectations of a bumper output in 2020.
18. IFPRI. IFPRI Blog: How much will global poverty increase because of COVID-19? 20 March 2020.
Overall, 1% lower growth in the world economy would translate into an increase in the global extreme poverty rate of between 1.6% and 3%—the wide range is due to the fact that poverty impacts are quite sensitive to whether the slowdown is through productivity or trade disruption shock differences. For the temporary, partial paralysis of business activity caused by COVID- 19 containment measures, global poverty would increase by a simulated 14 million people (a 1.9% increase in the total factor productivity scenario). But this number would increase to 22 million (3.0% increase) if trade channels were disrupted.
19. The World Bank. Food Security and COVID-19. 15 April 2020.
The World Bank identified four hotspots for food security, which include: (i) fragile and conflict- affected states, where logistics and distribution are difficult even without morbidity and social distancing; (ii) countries affected by multiple crises resulting from more frequent extreme weather events and pests like locust outbreak; (iii) the poor and vulnerable, including the 820 million people who were already food insecure before the COVID-19 crisis impacted movement and incomes; and (iv) countries with significant currency depreciation, driving up the cost of food imports.
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20. FAO. Q&A: COVID-19 Pandemic – Impact on food and agriculture. 2 April 2020.
FAO presented nine questions related to COVID-19’s impacts on food and agriculture including the role of the FAO. The most important findings are related to FAO’s recommendations to mitigate the risks of the pandemic on food security and nutrition. To avoid disruptions to the food supply chain and food production, FAO is urging all countries to: (i) keep international trade open and take measures that protect their food supply chain (from obtaining inputs such as seeds to assure small farmers have access to markets to sell their produce); (ii) focus on the needs of the most vulnerable, and scale-up social protection program including cash transfers; (iii) keep their domestic food supply value chains alive and functioning; (iv) taking all necessary precautions, seeds and planting materials must continue to flow to small farmers, animal feed to livestock farmers, and aquaculture inputs to fish farmers—agricultural supply chains should be kept alive by any means compatible with health safety concerns; and (iv) maintain agricultural activities.
21. ADB. ADB Blog. (i) Amid COVID-19, the time to act now to protect food security. 8 April 2020; (ii) The pandemic combined with climate change hitting the poor hard. 22 April 2020; (iii) COVID-19 highlights the need for safe, nutritious, and affordable food. 28 April 2020.
Prepared by ADB TA 9838-PAK Consultants: Dr. Shahid Ahmad ([email protected]) Mr. Sahibzada Mansoor Ali ([email protected]) Dr. Babur Wasim Arif ([email protected])